Nudging and Boosting: A Theoretical Framework for Policy Optimization

Abstract

Problems of optimization are pervasive in the modern world. Policy Makers, indeed, have the aim of adopting the best policies mix, under their budget constraint, to maximize economic and social welfare. We exploit the classical Consumer Theory to introduce the Policy Maker optimization problem in steering or empowering good decisions. Specifically, we focus on two main behavioral policies: nudging and boosting. This framework allows us, indeed, to focus on the main building blocks of the so-defined evolutionary function. Since the policy mix depends on the cost of the different policies and their different elasticities, under the (debatable) assumption of rational citizens (i.e. constant returns to scale), this means that these latter are the most important variables that should be estimated. Specifically, by means of surveys, we suggest approximating the elasticities level.